Puzhakkal Kuttappu Vs. C. Bhargavi
& Ors  INSC 228 (22 September 1976)
CITATION: 1977 AIR 105 1977 SCR (1) 696 1977
SCC (1) 17
Interpretation--Document whether mortgage or
lease deed--Tests for determination of.
By a registered deed described as "otti
deed" the otti right in a piece of land had been transferred in 1894 to
the predecessors-in-interest of the appellant and of the respondents by the
janmi for a period of 72 years for a certain consideration. The document
recited various debts in respect of wet lands. the debt owed by the executants
and cash received from the transferee on that date. Possession of the land was
made over to the transferee giving him the right to enjoy the land. The other
terms of the deed were that the transferee was required to appropriate the
income of the property to the interest on the amount advanced, to pay land
revenue; and a fixed amount to be paid by the transferee to the transferor
annually as "purappad", that is, the net produce or net rent payable
to the janmi after deducting interest on advances made by the tenant and the
Government tax. In 1949 the appellant and the respondents divided the property
among themselves by metes and hounds and in 1967 the appellant purchased Janman
rights in the entire land from the transferors for a small sum including the
otti debt with a view to become the owner and therefore a mortgagor and thus
get compensation with respect to the 3/4th share also. When the land was
acquired by the Government the appellant claimed the entire compensation, while
the respondents contended that the otti deed wan really a lease deed and that
as tenants in possession of the land they would be entitled to the entire compensation
under the Kerala Land Reforms Act, 1963.
The trial court held that the document was a
mortgage while the High Court held it to be a lease.
Dismissing the appeal to this Court,
HELD: (1)(a) When there are some mixed
elements in an instrument disclosing features of mortgage as well as of lease.
the Court will have to find out the predominant intention of the parties
executing the document viewed from the essential aspect of the reality of the
transaction. [701 A] (b) In construing a document it is always necessary to
find the intention of the party executing it. The intention has to be gathered
from the recitals and the terms in the entire document and from the surrounding
circumstances and how the parties or even their representatives-in-interest
treated the deed in question. The nomenclature given to a document by the
scribe or even by the parties is not always conclusive. The word 'otti', used
in the document, is not, therefore, of much consequence. [698 F] In the instant
case the document taken as a whole lacks the most essential ingredient of a
mortgage, namely, that the transfer of the property has to be made as a
security for the debt. The document stated that fixed rent was to be paid
annually in addition to the Government revenue which the transferee was
required to pay. This feature of payment of rent tilts the balance in favour of
construing the document as a lease, coupled with the fact that the essence of a
mortgage being the transfer of immovable property as security for the debt is
absent. There is no right to sell the property in ease the debt is not repaid.
There is nothing to show that the enjoyment of the usufract was intended to
wive out the debt in the long period of occupation. While there was arrangement
to pay a fixed annual "purappad" to the transferor, such a sum was
not 697 intended to be utilised towards reduction of the principal debt. There
is sufficient force in the contention of the respondents that the transferors
themselves treated this document as a lease, for else, it could not be
explained why they would have parted with their Janmam right of the entire
property inclusive of the otti debt if they themselves regarded this document
as an instrument of mortgage.
(2) The High Court was, however, wrong in
holding that where the document was of a composite character disclosing
features of both mortgage and lease it must be taken as a lease. [700 H] Later
Full Bench decision in Velayudhan Vivekanandan v. Ayyappan Sadasivan, I.L.R.
 1 Kerala 166, approved.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 1815 1975.
(Appeal by Special Leave from the Judgment
and Order dated 22-8-74 of the Kerala High Court in Appeal Suit No.
T.C. Raghavan, N. Sudhakaran and K. Rewal
Kumar, for the Appellant.
T.S. Krishnamurthy Iyer, T. Rajandra
Choudhury and Mrs. V.D. Khanna, for the Respondents.
The Judgment of the Court was delivered by
GOSWAMI, J. This appeal by special leave is directed against the judgment of
the Kerala High Court out of a proceeding for opportionment of compensation
under the Land Acquisition Act.
Certain property measuring 2 acres 21 cents
in R.S. 299/1 of Chevayur village was acquired by the Government.
The compensation which was awarded was a sum
of Rs. 2859.88 including the solatium. There were five claimants clamouring for
the compensation. While the first claimant (hereinafter to be described as the
appellant) claimed the entire compensation after making allowance for a small
sum of Rs.
437.50 in favour of the claimants 2to 4
(hereinafter to be described as the respondents) the latter, on the other hand,
claimed the entire amount minus a sum of Rs. 350/which, according to them, was
the entitlement of the appellant. The acquired property originally belonged in
janman (freehold right) to one Vakeri Thannanone Raman Nair. After his death
the same was inherited by his heirs and legal representatives. They assigned
their Janmam right on January 14, 1967. in favour of the appellant. Based on
such a right the appellant is now claiming the aforementioned compensation.
The earlier history of the property shows
that the 'otti' right in the land had been transferred to the Predecessors-in-interest
of the appellant and to those of the respondents by the daughter of Vakeri
Thannanone Raman Nair and other heirs by a registered document of December 30,
1894, for a consideration of Rs. 650/-. The document is marked as Ex. A-2. The
entire controversy between 698 the parties will turn on the construction of the
above deed (Ex. A-2) as to whether it is a mortgage fir a lease.
Although, prior to the assignment of the
Janman right in favour of the appellant the parties, naturally, would have been
sailing on the same boat as to theft status under' the deed, the acquisition of
Janmam right by the appellant in 1967 gave, him an opportunity to part company
with the respondents and to claim almost the entire compensation to the
deprivation of the respondents on the acquisition of the larger estate into
which the lesser estate had merged. The respondents, therefore, threw down
their gauntlet taking the position that the document Ex. A-2 evidenced a
transaction of lease and they acquired tenant rights in the land. If they
succeed in this: plea, they will be entitled to almost the entire amount of
compensation under the Kerala Land Reforms Act 1963 (Act 1 of 1964) and the
appellant even with the Janmam right will only get a pittance.
It may be noted that the appellant, had
already got his 14th share of the otti right by partition some time in 1936 and
there was a partition suit in 1949 when the appellant and the respondents
divided this property by metes and bounds in the course of execution of a
partition decree in O.S. 32 of 1949.
We are required to construe the deed executed
in the year 1894. The deed was not drafted by a lawyer conversant with the
legal implications of a mortgage or a lease but by a bond-writer as perhaps was
the usual practice in the fall of the last century and continuing even up to
the present times.
The deed was written in Malayalam and we have
an agreed translation of the document before us. The learned Judge of the High
Court being conversant with the language was naturally in a better position to
appreciate the significance in the original document placed side by side with
the translated exhibit.
In construing a document like the one before
us it is always necessary to find the intention of the party executing it. The
intention has to be gathered from the recitals and the terms in the entire
document and from the surrounding circumstances. How the parties or even their
representatives-in-interest treated the deed in question may also be relevant.
It is also well settled that the nomenclature given to a document by the scribe
or even by the parties is not always conclusive. The word "otti", as
such, used in the document, is not, therefore, of much consequence.
Before we proceed further we may turn to the
contents in the document. The deed is described as an "otti deed"
executed by Nani Amma, Janmam holder and manager and several other co-sharers
in favour of Kesavan Nambudiri. Next the document recites the various debts
including the kanom of Rs. 100/in respect of seven items of nilams (wet lands).
The debt owed by the executants on that date was Rs. 650/covering all the outstanding
dues up to that date and Rs. 8910 cash received on that date from the
transferee. Having recited the consideration in the deed as above the document
concludes as follows :The "Mambakkad paramba (dry land). described in the
Schedule under, belonging to us in jenm (absolute) 699 right, with all the
improvements therein has been demised and given to your possession for a period
of 72 years, you may enjoy the paramba (dry land) with all the improvements on
otti right and after adjusting the interest on otti consideration pay the
purappad Rs. 3155 fixed to be paid annually and also pay the revenue in our
jema and obtain receipt therefor. On the expiry of the said period, when the
otti amount is paid and the otti is redeemed, we shall pay the value of improvements
then found and fixed. We hereby assure you that to our knowledge and belief
there is no other charge or liability on this property".
Apart from the document neither party adduced
any evidence before the court. From the contents of the document it is clear
that the consideration was predominantly past debt and only a small sum of cash
was received on the date of its execution. Possession of the land was made over
to the transferee giving him the right to "enjoy" the land. The transferee
was required to appropriate the income of the property to the interest on the
amount advanced. The transferee was also to pay the land revenue to the credit
of the transferor. A fixed amount of Rs. 3155 was to be paid by the transfered
to the transferor annually as "purappad". This word
"purappad" means "the net produce or net rent payable to the
janmi after deducting interest on advances made by the tenant and the
Government tax*". The debt of Rs. 650/will remain unpaid even after the
expiry of 72 years when the said otti amount has to be repaid.
There is also an indication in the recitals
that the property will return to the transferor who "shall pay the value
of improvements then found and fixed". The is nothing in the recitals to
show that the land was given as security for the amount of loan. There is no
right of sale of the land delivered to the transferee in case the debt is not
discharged. On the other hand, there is a clear recital about the payment of
annual rent by the transferee to the transferor.
The trial court held the document to be a
mortgage whereas the High Court held it to be a lease. It is enough to point
out that the trial court was wrong in holding that the transferee was to
utilise the amount of Rs. 3-15-5 for paying the land revenue. On the other
hand, the document stated that this amount of fixed rent was to be paid annually
in addition to the Government revenue which the transferee was required to pay.
This feature of payment of rent, in this case, flits the balance in favour of
construing the document as a lease, coupled with the fact that the essence of a
mortgage being the transfer of immovable property as security for the debt is
conspicuous by its absence in the detailed enumeration of the terms. Further,
as stated earlier, there is no right to sell the property in case the debt is
not repaid. There is also nothing to show that the enjoyment of the usufruct
was intended to wipe out the debt in the long period of occupation.
We find that after the expiry of the period of
72 years mentioned in the document the appellant purchased the Janmam right of
the * Aiyar's Law Lexicon of British India, 1940, page 1050.
13-1234SCI/76 700 entire property in 1967 for
a sum of Rs. 1000/which included the sum of Rs. 650/which was the consideration
in Ex. A-2. The Kerala Land Reforms Act, 1963 (Act 1 of 1964) had already been
passed, by then. It would, therefore, appear crystal clear that whoever be the
janmi would be able to get only an infinitesimal sum of compensation for the property
acquired and the major share, would go to the tenants in possession under the
aforesaid Act. It is not disputed that the appellant got his 1/4th share of
compensation of the acquired property in terms of the earlier partition to
which we have already adverted. It was therefore, a clever act1 on the' part of
the appellant to manage to the Janmam right of the transferor in the year 1967,
when perhaps the proposal for acquisition of the land had already been in the
air, in order that he was able to claim the remaining 3/4th share of
compensation to which he would otherwise be not entitled except to an
The transferors, themselves, would be in no
better position after the Kerala Land Reforms Act. When, therefore, the
appellant offered to the transferors some money which the latter would not
otherwise have obtained, in view of the provisions of law, the assignment of
the Japnam right was made in favour of the appellant. The transferors thus
walked out of the field leaving the future contest amongst the transferees out
of whom the appellant came to be the Janmi. It is apparent that after the
partition the appellant would not stand to gain with regard to the 3/4th share
of the property, which is in dispute, by accepting the document a lease since
the respondents are the transferees in possession of this particular property.
The appellant, therefore had cast his lot in a gamble by purchasing the Janmam
right from the transferors in 1967. There is sufficient force in the contention
of the respondents that the transferors themselves treated this document as a
lease for else it cannot be explained why they would have parted with their
Janmam right of the entire property for Rs.1000/-, inclusive of the otti debt,
if they themselves had regarded this document as an instrument of mortgage.
There is another significant feature that
while there was arrangement to pay a fixed annual "purappad" to the
transferor, such a sum was not intended to be utilised towards reduction of the
principal debt. It is, therefore, not possible to say that the High Court is
wrong in holding that the consideration of Rs. 650/in the deed was intended as
a premium for the lease. There is also no evidence whatsoever to indicate as to
what the price of the land was to determine the proportion between the amount
advanced and the value of the property. The document taken as a whole lacks the
most essential ingredient of a mortgage, namely, that the transfer of the
property has to be made as a security for the debt.
The High Court has also noted that since the
document was of a composite character disclosing features of both mortgage and
lease it must be taken as a lease. We do not think that the High Court is
correct in this view. Indeed the High Court in a later Full Bench. decision has
not accepted this view. (See Velayudhan Vivekanandan v. Ayyappan Sadasivan).
(1) (1) I.L.R.  1 Kerala 166.
701 We are of opinion that when there are
some mixed elements in an instrument disclosing features of mortgage as well as
of lease, the court will have to find out the predominant intention of the
parties executing the document viewed from the essential aspect of the reality
of the transaction.
Human transactions cannot be tied to textual
definitions. They have to respond to variable requirements under different
situations and often to the dictates of the party at an advantage in the
bargain. Mortgages are not always simple, English, or usufructuary or such
other types as defined in the Transfer of Property Act. They are anomalous too
and sometimes more anomalous than what is defined in the said Act. Even so,
there is one most essential feature in a mortgage which is absent in a lease,
that is, that the property transferred is a security for the repayment of debt
in a mortgage whereas in a lease it is a transfer of a right to enjoy the
property. We have seen that this essential feature of a mortgage is missing in
the document in question. We are, therefore, unable to come to the conclusion
that it is a mortgage and not a lease.
In view of the foregoing discussion, we are
not able to hold that the High Court is not right in holding that the document
in question is a lease and not a mortgage. In the result the appeal is
We will, however, make no order as to costs.
P.B.R. Appeal dismissed.